Pyramid schemes focus on recruitment, cash
Pyramid operations continue to surface across the state and the Utah Division of Consumer Protections cautions Carbon County residents to avoid falling victim to the schemes.
Pyramid schemes are unlawful money-making ventures, pointed out the consumer protection division.
The schemes focus on the exchange of money and recruitment of participants. Usually, there is no legitimate product being sold.
Pyramid schemes may be disguised as gift clubs, games, chain letters, buying clubs, motivational companies, mail order operations or investment organizations.
Basically, a pyramid scheme is formed when a single promoter or small group collects money from a certain number of friends and instructs the participants to collect additional cash from their associates.
The cycle continues and, as the operation grows, the number of people involved becomes too large to sustain the pyramid.
Some people will fail to send in money or recruit the required number of friends and the pyramid crumbles.
The majority of the participants end up on the bottom of the pyramid and inevitably lose the so-called initial "investments."
In order for all levels in pyramid scheme to profit, there would have to be an unending supply of participants.
But the supplies are limited, with newer participants having less of a chance of recruiting people and facing a greater risk of losing money.
Because pyramid sales plans are deceptive by nature, the schemes are illegal.
Participants face the risk that a pyramid operation will be closed down by police, with the involved parties subject to fines and possible criminal prosecution.
Few people would pay to join a pyramid scheme if the odds were fully and accurately explained.
Pyramid schemes are actually based on simple mathematics. Many losers pay a few winners.
Pyramid promoters are masters of group psychology.
At recruiting meetings, the promoters create a frenzied, enthusiastic atmosphere where group pressure and promises of easy money play upon greed and the fear of missing a good deal.
The sale of legitimate products distinguishes multi-level marketing operations from pyramids, pointed out the consumer protection division.
If the emphasis in a multi-level marketing company is to build a sales force rather than sell the business' products, it may be